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India's manufacturing sector expanded at a 16-month low in March, the widely-tracked HSBC purchasing managers' index (PMI) showed. The expansion in March was the slowest since November 2011, when the PMI stood at 51 points.
In March, manufacturing PMI stood at 52 points, against 54.2 in February and 53.2 points in January. In March 2012, the index stood at 54.7 points. A reading of more than 50 points indicates expansion, while one below 50 shows contraction.
Markit Economics, which compiles the PMI data, attributed the deceleration in growth to a slow rise in the number of new orders and persistent power failures. It said though export orders and output rose, growth in export orders was the slowest in seven months.
Purchasing activity and average rates rose. However, on both fronts, growth was the slowest since October 2012. Input cost inflation was the lowest in 32 months.
Vendor performance deteriorated at the quickest pace in about two years. To meet order requirements, manufacturing companies had to reduce stocks of finished goods. Both backlog and payroll numbers saw a marginal rise.
"Inventories of finished goods were depleted to meet demand, partly due to output disruptions caused by power cuts. This suggests in the coming months, output could get a boost, as inventories are replenished. Encouragingly, input and output price inflation eased," said Leif Eskesen, chief economist for India and Asean (Association of Southeast Asian Nations), HSBC.
The surveyed firms said they couldn't pass on the rise in costs because of increased competition.
About 500 private manufacturing companies are surveyed for calculating PMI.
At 53.13, average PMI for the quarter ended March was the lowest in 2012-13.
